This bill reauthorizes the Child Care and Development Block Grant Act of 1990, allocating $14 billion annually for fiscal years 2026 through 2031. A core change mandates that states offer parents child care certificates for all direct services, shifting away from grants or contracts. This significantly increases the percentage of funds states must use for direct services via certificates from 70% to 90%, emphasizing parental control over child care decisions.

The bill significantly expands access to and support for relative caregivers and in-home child care providers by exempting them from many state licensing and safety requirements. States must notify parents about using certificates for relative caregivers, including family members, and allow direct disbursement to married parents acting as caregivers for their own children under specific conditions. To further support this, the bill requires states to review and remove burdensome regulations on relative caregivers and sets a minimum payment rate for them at 75 percent of the rate for family child care providers.

Protections for religious child care providers are strengthened, ensuring states do not impose disproportionate burdens on them compared to non-religious organizations. The legislation affirms their right to maintain religious character and mission, preserving existing religious exemptions under various civil rights laws, and establishing a private right of action for violations. Eligibility criteria are also updated, introducing a family asset limit of $1,000,000 and preventing immediate termination of assistance for unmarried parents who marry and exceed income limits.

Additionally, the bill establishes two 2-year pilot grant programs, each authorized at $50 million, to combat fraud and promote innovative state initiatives for increasing relative caregiving. Finally, it repeals Section 21 of the Internal Revenue Code, eliminating the federal credit for expenses for household and dependent care services. This significant tax change, along with conforming amendments, will apply to taxable years beginning after the bill's enactment.